409-771-0946 pwvb@comcast.net Century 21 Bay Reef Realty
Real Estate Glossary
Appraisal An appraisers written opinion of the market value of a property, primarily based on an analysis of comparable sales (known as “comps” in real estate lingo) of similar homes nearby. Appraised Value An estimate of fair market value of a property based on an appraiser's professional opinion, analysis of the property and comparable sales. Appraiser A licensed individual qualified by training and experience to estimate the value of real estate. Assessed Value The valuation placed on property for purposes of taxation. Assessment An appraisal; establishing the value of a property for the purpose of taxation. Assessor-Collector A public official who levies and collects property taxes. Assumable Mortgage A mortgage that can be taken over by the buyer when a home is sold without a change in terms or rise in interest rates. Assumption The act of assuming the seller's mortgage. Broker Broker has multiple meanings.Generally it refers to an agent or intermediary who brings two or more parties together for a transaction. Most real estate agents work under a real estate broker, but some agents are also brokers themselves.Brokers are required to have more training than agents. Another kind of broker is the mortgage broker who does not lend money, but arranges loans with larger lenders or investors. Clear Title A title that is free of liens and other legal issues that would question ownership of the property. Closing In Texas, a closing is a meeting where all of the documents are signed, money changes hands and documents are recorded at the local recorders office. Closing Costs Costs to the buyer and seller in a real estate transaction. There are two types of closing costs: non-recurring closing costs (one time costs) like fees and commissions), and pre-paid items (costs that recur over time) such as property taxes and insurance. Closing Statement See Settlement Statement. Co-Borrower A secondindividual who, along with the other borrower, is responsible for repayment of the loan and is named on the title to the property. Commission Most real estate agents and brokers earn commissions for the work that they do.There are many sales professionals involved in each transaction, including agents, brokers, loan officers, title representatives, attorneys, escrow representatives and more.Commissions are paid either by the seller or the borrower and are listed on the settlement statement. Comparable Sales Recent sales of similar properties in nearby areas used to help determine the market value of a property.Also referred to as comps. Deed The legal document which conveys title to a property Deed of Trust Some states do not record mortgages.Instead, they record a deed of trust which is essentially the same thing. Down Payment A partial payment -- not financed, but paid in cash –made toward the purchase price of a property. Earnest Money Deposit A deposit made by the buyer to illustrate the buyer’s seriousness about buying the property. Easement A right of way giving persons, municipalities and utility companies the right to use or access another party’s property. Encroachment An addition or other improvement that intrudes illegally on another's property. Encumbrance Anything that affects or limits the fee simple title to a property, such as mortgages, liens, leases, easements, etc. Equity An owner's financial interest in a property; the difference between fair market value and the amount owed on its mortgage and other liens. Escrow Funds deposited with a third party to be delivered upon the fulfillment of a condition.For example, the earnest money deposit is put into escrow until delivered to the seller upon closing. Escrow Account Extra money held in a special account for the purpose of paying assessments such as property taxes and insurance. Part of a borrower’s monthly payment goes into this account and the lender pays the assessments direclty from the account.Not all loans are required to have an escrow account. Escrow Analysis An annual review of an escrow account by the lender to analyze and compare escrow funds to expected expenses.Monthly escrow payments can be adjusted up or down depending on expected expenses. Escrow Disbursements Payments made on behalf of the borrower by the lender from the escrow account to pay real estate taxes, hazard insurance, mortgage insurance, etc. Exclusive Listing A contractual agreement between a seller and a licensed real estate agent giving the agent exclusive rights to represent the seller and list the property for a specified period of time. Fair Market Value Market value based on estimates of what a willing but unpressured buyer and a willing but unpressured seller would likely agree upon in a real estate transaction. Fannie Mae (FNMA) The Federal National Mortgage Association, commonly known as Fannie Mae, is a shareholder-owned company that trades on the New York Stock Exchange.Originally established as a federal agency in 1938, Fannie Mae is now a government-sponsored enterprise chartered by Congress in 1968.Its mission is to provide liquidity, stability and affordability to the U.S. housing and mortgage markets. It is the nation's largest supplier of home mortgage funds, but Fannie Mae does not lend directly to home buyers.Instead, it works with primary mortgage market partners (banks, brokers, etc.) to ensure funds are available to borrowers at affordable rates.Mortgage investments are funded primarily by issuing debt securities in the domestic and international capital markets. FHA Mortgage A mortgage that is insured by the Federal Housing Administration (FHA). Fixed-Rate Mortgage A mortgage in which the interest rate remains fixed or stable throughout the duration of the loan period. Fixture Any personal property that is permanently attached to real property (a house or building) and thus becomes integral to and part of the property.Examples would be lights, ceiling fans, shelving, window screens, etc. Flood Insurance Insurance that covers property loss or damage from flooding.It is required for properties located in federally designated flood areas. Foreclosure The legal process by which a borrower in default on a loan losses his or her interest in the mortgaged property. Good Faith Estimate (GFE) Required by law, a Good Faith Estimate is an attempt by the lender to estimate the amount of closing costs and expenses associated with a loan. The itemized list of fees and charges must be provided to the borrower within 3 days of the loan application. Grantee The buyer or person to whom an interest in real estate is conveyed; the person receiving the title. Grantor The seller or person conveying an interest in real property to another. Hazard Insurance (or Homeowners’ Insurance) Insurance that covers physical damage to a property from fire, theft, vandalism and other hazards. Home Inspection An inspection by a professional that examines the structural soundness and mechanical condition of a structure.A satisfactory inspection is often stated as a contingency by the buyer and is usually paid for by the buyer. Homeowners' Association (HOA) A nonprofit association that manages the common interests of a planned unit development (PUD) or condominium. Homeowner’s Insurance An insurance policy combining personal liability insurance and hazard insurance coverage for a dwelling and contents. Homeowner’s Warranty A type of insurance often purchased by homebuyers that covers repairs to items such as heating or air conditioning units, dishwashers, etc. should they stop functioning during the period of coverage.The buyer often asks the seller to pay for this, but either party can make the purchase. HUD-1 Settlement Statement (or Closing Statement) A comprehensive, itemized listing of funds paid out at the closing of a real estate transaction.Items listed include commissions, fees, points, escrow funds, etc.The totals at the bottom of the settlement statement show the seller's net proceeds and the buyer's net payment.The settlement statement form is provided by the Department of Housing and Urban Development (HUD), thus the name HUD1. Joint Tenancy A form of legal co-ownership, also known as survivorship, in which each party owns the whole property and that ownership is not separate.At the death of one party, the survivor becomes the sole owner.Spouses often hold property and other assists in joint tenancy. Lease Option A contractual arrangement that enables buyers to lease a property with an option to buy it later. Legal Description An official written description of property that delineates the exact location and identify of the property. Lender The institution making the loan or the professional representing the lending institution. Lien A legal obligation or claim against a property making it collateral against what is owed.A lien must be satisfied before property is sold.A mortgage or second mortgage is considered a lien. Loan Origination The application and processing of a new loan. Mortgage A document that pledges a property to the lender in the event the debt is not paid off.Today, mortgage and loan are used interchangeably, but technically they’re two different but related things. Mortgage Broker A person or company that specializes in originating and placing loans on behalf of lending institutions and who acts as an intermediary between borrowers and lenders. Mortgagee The lender Mortgage Insurance (MI) Insurance that covers the lender against losses in case of a default and which are usually required with loans that have a loan-to-value higher than 80%. Mortgage Insurance Premium (MIP) The amount paid by a mortgagor for mortgage insurance. Mortgagor The borrower. Origination Fee A fee charged by a lender to cover the costs of initiating a new loan; it is usually factored as a percentage of the mortgage amount. Owner Financing A real estate transaction in which the seller finances all or part of the purchase. Personal Property Any property that is not real property -- that is not real estate. PITI Principal, interest, taxes and insurance.If you have a loan with an escrow account, your monthly payment includes all of these and probably mortgage insurance too. PITI Reserves Cash that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home.PITI reserves must be an amount equal to payments for principal, interest, taxes and insurance for a predefined number of months. Points A form of pre-paid interest; also called discount points one point is 1% of the loan amount.Borrowers pay points in order to reduce the loan’s interest rate. Power of Attorney (POA) A legal document authorizing one person to act on another's behalf.A POA can grant complete authority or it can have limitations. Pre-Approval A term which generally means that a borrower has completed the loan application process and an underwriter has reviewed and pre-approved it, assuming a certain loan amount, interest rate and other terms.It is not a guarantee that a loan will be given however; once a property is selected, it must still meet the lender’s underwriting guidelines.A pre-approval is different from a pre-qualification. Pre-Qualification A loan officer's written opinion of a borrower’s credit-worthiness and ability to qualify for a home loan; the loan officer may or may not have reviewed a credit report on the borrower. Principal 1.) The actual amount borrowed or the outstanding balance still owed on a loan. 2.) That part of the monthly mortgage payment that does not include interest, taxes or insurance and that reduces the remaining loan balance while increasing the borrower’s equity in a property. Principal, Interest, Taxes, and Insurance (PITI) The four parts of a monthly mortgage payment on escrowed loans.Principal is the part that reduces the balance owed.Interest is the lender’s fee for; Taxes and insurance are paid into an escrow account for property taxes and insurance. Private Mortgage Insurance (MI) Insurance that protects lenders against loss if borrowers default.Most lenders require MI for loans with a loan-to-value (LTV) percentage higher than 80%. Public Auction An auction in a public location to sell property in default. Planned Unit Development (PUD) A project or subdivision that has common property owned by a homeowners' association for the benefit of all of the PUD’s property owners. Purchase Agreement A contract signed by the buyer and seller stating the terms and conditions of a real estate sale. Real Estate Agent A person licensed to negotiate and transact real estate sales. Real Property Land and improvements, including anything permanent such as structures, machinery, etc.; immovable property; real estate. Realtor® A real estate agent, broker or an associate who is a member of a local real estate board that is affiliated with the National Association of Realtors. Recorder County Clerk; The public official who keeps records of transactions regarding real property. Recording The official noting of a legal document, such as a deed or a mortgage, making it public record. Right of First Refusal An agreement in which the owner of a property gives another party the first opportunity to purchase or lease the property before it is offered for sale or lease to others. Right of Survivorship In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant. Second Mortgage A mortgage with a lien position subordinate to the first mortgage. Secondary Market Market in which existing mortgages are bought and sold. Secured Loan A collateral-backed loan. Security Property pledged as collateral for a loan. Subdivision A housing development created by dividing a tract of land into lots. Survey An illustration showing legal boundaries of a property, the location of buildings, easements, rights of way, encroachments, and other physical features of the property. Tenancy in Common Unlike joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death. Third-Party Origination When a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package a mortgages that the lender will deliver to the secondary mortgage market. Title A legal document proving a person's ownership of a property. Title Company A company specializing in examining and insuring real estate titles. Title Insurance Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from ownership disputes. Title Search The process of researching title records to verify legal ownership of a property and to check for liens or other outstanding claims against the property. Transfer of Ownership Any means by which ownership of a property changes hands. Truth-in-Lending A federal law that requires lenders to disclose, fully and in writing, terms and conditions of a mortgage, including the annual percentage rate (APR) and all other charges.